Following the release of our Bounce back banking white paper, which explored how financial institutions can adopt new approaches to help SMEs recover from the impact of COVID-19, we partnered with FinTech Finance to ask influencers from the payments and banking industry for their views on how the ecosystem is changing.
The interviewees:
- Juan Jimenez Zaballos, Santander Digital
- Georg Ludviksson, Meniga
- Dean Wallace, ACI Worldwide
- Elliott Limb, Mambu
- Panagiotis Kriaris, Unzer
- Alex Mifsud, Weavr.io
- Thibault De Barsy, Emerging Payments Association
How the thinking around financial infrastructure is changing
Banks are finding that they need to free themselves from legacy infrastructure to be able to deliver the products and services their customers want and need. One way that they are doing this is by taking advantage of Open Banking, connecting with third parties, and embracing a banking-as-a-service model via APIs.
Although banking infrastructure has historically been closed off, Juan Jimenez Zaballos explains that while things are opening up, there are still issues to overcome.
“APIs are something every bank I know and interact with are betting on. APIs are the driving force to open up the ecosystem, to interact with third parties – FinTech, other banks, and regulators. We are all travelling this journey together, and there’s plenty of opportunities”.
Georg Ludviksson, Meniga, talks about how the approach to infrastructure has become more strategic, with banks and FinTech working to deliver more modularised systems and solutions in order to solve interoperability issues.
“More and more services are now consumed via APIs. Delivery models are changing, and with the rise of Open Banking, that’s also blurring the lines between what’s inside a financial institution or a FinTech, and what’s outside. Interoperability, and the ability, for example, for banks to connect with APIs of FinTechs and offer their services as part of their value proposition is becoming more important than ever before”.
The changes to financial infrastructure has allowed for new players to enter the market. Thanks to entities that focus on providing banking-as-a-service, banking-as-a-platform, and APIs, there is no need to build infrastructure from scratch, resulting in significant cost savings for banks.
Panagiotis Kriaris, Unzer, says:
“What used to be very expensive and very time consuming to launch, today you can launch a financial services product by using somebody else’s capabilities.”
COVID has accelerated digital adoption
Cost isn’t the only challenge. Accelerated by COVID, agility has become a major factor when it comes to improving infrastructure, as Elliott Limb, Mambu points out:
“It’s not just a cost play, it’s an agility play as well, allowing people to quickly scale up or down and allowing them to roll out into new jurisdictions and launch products much faster. COVID has been an expediter of this, it’s gone from being this perceived technology risk to a very real business risk of not having this ability to be agile. That is something that the larger banks are learning from the challenger banks and neobanks.”
Across Europe, it has often been impossible to visit a bank in person as a result of the pandemic, and the digital experience became a priority for many banks out of necessity. But it’s important to get the digital infrastructure right – not just the front end experience. Financial institutions need to build infrastructure that is sustainable and scalable from day one, to meet demands, as this is key to how a product evolves. This should ensure that the rush to digitise does not leave gaps in their future strategies.
Who will thrive in the new banking ecosystem?
Digital adoption has seen a fundamental shift in the past decade, which has accelerated significantly as a result of the challenges faced in the last year. Tech giants, neobanks, new players, and new ideas are entering the ecosystem now more than ever before.
For FinTechs to ensure long term success as the ecosystem continues to evolve, they must focus on niches that banks do not have the time or strategic planning to invest in – partnering with them to bring better solutions to market.
Digitalisation is making a return to relationship banking possible, and by allowing specialised FinTechs to take care of non-core functions behind the scenes, traditional banks can focus on owning the customer relationship.
Alex Mifsud, Weavr.io explains:
“We’re in a period of transition. Some banks will invest in digital first businesses. Banks try to be FinTechs, FinTechs try to be banks. But in the end, the world will settle for less vertically integrated financial brands that deliver solutions or experiences. Banks used to be isolated in this world of being licensed and having the market to themselves. That has been blown up.”
The new banking ecosystem is all about collaboration and creating a space where all parties can be aligned on strategy and outcome. While the monopolisation has ended for banks, breaking up the value chain and letting FinTechs add services that enhance their proposition has actually allowed them to be more competitive, and more profitable.
